Rachel Warren (4:32)

Something that I thought was really interesting is this assessment you've developed to identify your AQ archetype. And I'd love if you could talk about what that is and kind of break that down for our audience.

Liz Tran (4:46)

Yeah, absolutely. When we talk about being high aq, the opposite of that is being rigid. And rigidity comes from when you're sort of stuck in a mindset, stuck in a perception of the world or stuck in a perception of yourself. So what the AQ archetypes assessment does is it helps you to actually see yourself more thoroughly and codify what your strengths and weaknesses actually are to help you spot blind spots. I actually think this is one of the core fundamentals of being a competent and successful investor these days is this constant pressure testing of yourself, of understanding where your biases are, where your blind spots are. And that's actually what the assessment helps you do. It characterizes you as one of four archetypes. You're either a firefighter, great under pressure, great in emergency situations, but not very planful. A novelist, which is the opposite of that. Extremely planful, goal oriented, great at synthesis and narrative, but not so good at emergency situations. You could be an astronaut, which is the most innovative of all the types. You're always thinking about the next frontier of innovation, but people might not be able to quite follow you because you move so quickly. And then finally, the neurosurgeon, which is sort of the most thoughtful, the most diligent, and the one motivated by excellence, but can also move a lot more slowly. And so for us, we need to understand our type because one's not better than the other, but you need to know how to make the most of the specific hand that you've been dealt and know how to play it with sort of the most intentionality and to be able to see yourself extremely objectively. I myself am a novelist. I love making a plan for my life. I always have a five year plan. I always have an agenda for every call. I always have my week mapped out exactly. You know, how the meetings need to fall, how everything needs to go. But I do get turned upside down when, for instance, we have a blizzard in New York City. And I meant to fly to a work conference in Miami tomorrow. So just knowing the type you are.

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Rachel Warren (7:55)

well, and something that I think as well is really interesting to think about as long term investors understanding this reality that you've been discussing and really leveraging the power of AQ to kind of free ourselves from these patterns of avoidance and cultivate more agility when it comes to actual investment decisions. So maybe you can delve a little bit more into how some of those principles as it relates to AQ can help us be better decision makers in the current and of course, long term market environment.

Liz Tran (8:24)

Yeah, and I think this is especially true for long term investors is that the way that I describe this in AQ is about wearing both a green hat and a black hat. And what I'll explain by that is that there's this way of describing different methods of thinking. And there are six hats. Each color represents a different way that you could work through a problem. So for instance, the white hat is just facts and figures. It's just understanding literally the information in front of you. The black hat, which is one of the hats that all investors need to hold, is truly that of what is the worst case scenario? What is the downside here if everything goes wrong? What would that be? What are all the details that I need to understand here? It's almost the sort of cynical, pessimistic, but also just very realistic way of seeing the world. And at the same time, I think that what's required for AQ is to hold that black hat in tandem with the green hat. And the green hat represents future hope, potential, what could be in the future for your investments. Right. You're always looking at, oh, okay, if I believe this story that's gonna happen, then we're gonna get X rate of return on this because this company, this stock, is gonna live up to its greatest potential. And so what I think is really interesting is that investors are being stretched to wear both of those hats equally, as are operators. I mean, I think we all are. And so this is what I mean by AQ is that there's actually like this fluidity and this flexibility with where you can actually hold these two very opposite sides of the spectrum simultaneously. And so I'll give you an example of that. One of my clients is a GP of a crypto fund. And, you know, he holds, you know, hundreds of millions of dollars in his portfolio in liquid crypto assets. So constantly evaluating whether or not he should buy or sell. And of course they have a very, very detailed sell plan that they've worked on. You know, they've had this in place for four years and then they have individual plans for each of the individual assets. And then in this past fall, as things started to change a lot in crypto, there was this big conversation of, do we sell everything? What's going to happen? Is there going to be a downturn? And he, for months would look at that sell plan every single night in different parts of it. And he would, this is what we call an AQ language, he would strategically unlearn. So he would look at the cell plan and think, does this actually make sense? Can I pull more data? Is this accurate? And truly, 80% of the time, 90% of the time, he would leave these thinking sessions and think, yeah, actually the cell plan's right. Right. And so that was the thing is, like there wasn't actually that much movement, but there was the constant black hat of thinking, is this wrong? Right, Was I wrong before? He didn't really change his plan at all. Like when he looks back at this month long period. But it was all necessary to get to understanding of like, not just holding the green hat of like, our sell plan's right. We did a great job. You know, we're just going to keep going with this. The market looks good. And then here we are a few months later, and out of all the top funds, he was the only one that sold and actually timed it correctly. And all of his GPS and his investors said, you look like a genius. You're the only ones who did that. And it was his willingness. The reason why, quote unquote, he looks like a genius now is because he was willing to look like a moron for months, you know, to constantly make himself think, were you wrong? Were you wrong? Were you wrong? Or is there more data I can pull from somewhere? Should I look at the trades that ETFs are doing? Should I keep, Is there an area that hasn't been explored? And he didn't just rest when he said, yeah, okay, self plan looks right, he would do the same thing the next day from 9pm when he put his kids to bed to 11pm at night. He would just go back through and say, okay, am I a moron? I don't know, let's figure it out.

Rachel Warren (12:14)

But is there any data you've seen, whether observationally or otherwise, about how founders, execs of public companies with high AQ tend to make better financial or investment decisions or just decisions for the direction of the company overall, that could be publicly traded examples or otherwise.

Liz Tran (12:31)

Yeah, I think that the proof is in the pudding in a lot of ways. I think as just a very specific example to go to one person, n of 1, I think about when Satya and Nadella took over Microsoft in 2014, and, you know, the stock price at Microsoft had been flat for a number of years and they had really missed out on big trends like mobile, social, gaming. And investors were not bullish about that stock. When he took over, the very first thing that he did was instead of making, you know, kind of big strategic decisions, he turned around the entire culture and he said, we're not going to be a know it all culture anymore where everyone says, I'm right, I'm the expert. We're going to transition into a learn it all culture, which is about as high aq as you can be. This idea that success isn't in being the expert, but success is in constantly being a sponge, open to learning, open to growing. And so they made mugs and they put them in all the kitchens about how you needed to be a learn it all. They put up posters everywhere. He trained the executive team to constantly come back to this idea that people needed to be learning, learning, learning constantly. And then look where they are now. Their stock price has 10x in the few years that he had taken over. And then they actually have been innovators in AI and really been bullish about their investments there. It's been a totally different Microsoft. And so that is just like an N of one example that I think about all the time, where you can hire the best and the smartest people, but unless you're also pushing them to be agile and adaptable, then you're not gonna get the performance out of your company.

Rachel Warren (14:17)

And so much of, I think what we're talking about today has to do with the psychology of being an investor, which is something that we really talk about a lot here at the Motley fool is that mindset with which we approach portfolio building. And of course that looks very different for every individual investor. But I think, as we've seen a lot of volatility in the markets of late, there's, of course, a lot of exciting trends in which to invest. Of course, AI is on the tip of every investor's tongue. Space, quantum computing, the list goes on. But as we see these movements and changes in the market, whether it is, you know, concerns over a bear market or just the ongoing volatility, what are some, you know, principles that we, as long Term investors can apply to not see those changes as threats, so to speak, but as proactive change events. Yeah.

Liz Tran (15:02)

So the first thing I'll say is that it's about defining what you think makes you successful as an investor. Right. And AQ is really at the heart of that. And. And that's actually fun and exciting. I think it opens up an opportunity for everyone. See this moment where the markets are quite volatile as a moment to level up. And, you know, there are some doors opening for people to, you know, gain expertise and footing in places where they haven't had it before, which I think is actually really exciting. You know, in this new world, there's also new opportunities and new chances to sort of broaden your portfolio in a way that you hadn't thought about before. So, one, I want to say, like, let's all level set and just say this is an exciting moment. It's scary, right? It's different. But with newness and with change invites in opportunity. And so there are three strategies that I recommend, given that mindset, and one is one that we touched on briefly, which is this idea of practicing strategic unlearning, so on a regular basis, conducting some sort of audit, and the cadence of which is going to depend on how actively you're making portfolio changes. For some people, once a month is enough. For some people, once a week is enough. But it's basically going through pieces of what you've invested in or parts of the knowledge that you've made assumptions on. And you can choose one piece every time you do an audit. And then you simply ask yourself, is there a part of my core belief about this industry or about this investment that is no longer true? And how can I find new or different sources of information or data that could prove or disprove this? You can also ask yourself, what parts of my workflow are no longer accurate? Are there ways that I've been writing investment memos or making investment decisions that no longer hold true to how quickly or slowly I need to move through these decisions right now? What parts of my expertise might I be clinging to too tightly right now? And then with that strategic unlearning, you remove something, maybe that means actually removing something from your portfolio, or it could mean killing a legacy process, redesigning an investment thesis from scratch and seeing if you come up with the same thing, but doing that again. But really what you're doing is you're creating new space for new expertise to emerge. And I think a lot of us were trained to just add more, right? Add more information, add More knowledge. And that can be a fire hose these days if you're just absorbing, absorbing, absorbing and people can become overwhelmed. But high AQ people are also willing to let go of some of what they've learned before. That's the first one. The second thing I will say is expand the contours of your universe. And so a lot of this comes down to talking to other people, growing your network, coming up with new strategies and tools for the way that you invest. Because the blueprints that we've used in the past are not going to carry on towards the future. And I think that that's just something that we need to accept that maybe you've been taught, you know, you've grown up on value investing or you know, you've grow up with a specific mindset of the way that you manage your long term investments. Not to say that it's not going to be fully accurate, but part of your new thesis as an investor is going to be brand new. I call it bushwhacking. It's an important skill of AQ and it's creating a path where none existed before. So we are not going to just be able to rely on the old philosophies or the old ways that we've grown up. Whether it's in business school or what we've learned from our mentors about the principles of investing. We can hold onto those, but we also need to create our own. And so this means talking to people who are maybe newer or more free flowing with their investments. Not to say that you should take everything from them, but just expanding your repertoire of what is possible in terms of the way that you see the world. And so I think that's a really, really important one. Like how do you expand the aperture of your universe, your toolkit of investing, even if it seems opposite to what you've learned in the past, because you're knowing that like what the future demands is not a path that has been already clear cut. You're going to have to make your own way because the world is not the same as it was even five, 10 years ago. And finally, the last skill I will use is to know yourself really well. It's about self awareness these days. And you have to know your biases, your limitations, the places where you're holding on too tightly to pieces of your investments, or where you're holding on too tightly to the way that you see yourself. Because a big part of AQ is about relinquishing the ego, which I think makes everyone a better investor. When you can see the mirror very clearly. You're not going to be tricking yourself into specific decisions that may not be the best for you. You're able to look at yourself very clearly and say, okay, maybe I did made this decision a month ago, but it's just not right right now.

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Rachel Warren (20:53)

One final question. You know, I think that one of the big takeaways I've had from our conversation today is that AQ is one of the most important skills that we can pass down and implement, certainly as investors as well as in other areas of our life. But as we look ahead over the next five to 10 years, how can investors prioritize remaining financially agile rather than just financially literate?

Liz Tran (21:15)

Yes, definitely. I think part of this is also creating a learning plan for yourself, knowing where it is that you want to go. And as we discussed before, there are moments to be reactive to the market and let that dictate the type of investor that you need to be, what you need to learn. But then there's also this part of knowing that you are going to be evolving and growing and constantly having individual development plan for what your gaps are. You know, I've definitely seen investors who say things like, oh, well, like, I'm just not an AI person, right? Like I'm a consumer person. Like, those are the companies that I understand, those are the markets that I want to be in. We can't say those rigid things about ourselves anymore. You can't be like, oh, well, like I'm an X person, not a Y person because it's just not true. We all are so adaptable innately and that's actually what we need to remember is that AQ is our birthright. We all have the potential to be extremely high aq. Our ancestors were nomads who were hunter gatherers and they didn't know what was going to happen tomorrow. They didn't even know what they were going to eat or where they were going to sleep. And so they were dealing with like a much greater degree of volatility than even the most risk taking investors are. Right. We ultimately live in temperature controlled buildings and like, you know, we can like predict our future with like a far greater certainty. And so I think what it is is like, know that your value and your expertise as an investor will definitely change and that there needs to be a letting go of the rigidity of how you see yourself. Where like, oh, I only, you know, look at X type of market or X type of company or this is where my sweet spot is. Let all of that go and think from a first principles perspective of where it is that you want to take your expertise. Like, don't let the past dictate where you're going to go in the future.

Rachel Warren (23:09)

Well, I think you've given us all a lot to think about today, Liz, and it's been so fun to chat with you and talk about the concept of aq. And for those who are listening or watching, check out Liz's book, aq. A New Kind of Intelligence for a World that's Always changing. Liz, thank you so much for joining me today.

Liz Tran (23:25)

Thanks for having me, Rachel,

Matt Grier (23:30)

as always. People on the program may have interest in the stocks they talk about, and the Motley fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes for the Motley fool money Team, I'm Matt Grier. Thanks for listening and we will see you tomorrow.